I had the opportunity last week to share our new short-form Bank Simulation with AVID students at Mountain View High School. I like to open any class about bank accounts with a question to find out who has a checking account. My next question is intended for these accountholders and is simply "How many of you have ever heard of overdraft fees?" High school students don't always have the best poker faces and it's easy to tell who has felt the sting of these fees. Grimaces, pained expressions and audible groans often fill the room. "Would anyone like to share?" seems the next logical question and here is where you discover the costs of not understanding how to manage a bank account in this digital era. It's a costly education.

Next, I walk through two scenarios with students. One is a student with overdraft protection who unknowingly only has $10 in their account and proceeds to use their debit card at Chipotle ($11), at the movie theater ($12) and an ice cream shop ($5). After overdraft fees, each of these items has just been marked up to $45 for Chipotle, $47 for the movie ticket and a $39 ice cream. They quickly get the fact that the cost of not monitoring your account can really raise your cost of living. 

The second scenario involves a student WITHOUT overdraft protection [Lots of students are surprised that you have to opt in to overdraft protection by law.] The students usually get what happens when the young person with $10 in their account tries to buy that $11 burrito meal. "Transaction denied" they often shout in unison. In the class, last week, a student almost on cue said "But that's embarrassing." This led to a fascinating conversation where students pondered the question of whether the public embarrassment of being denied at check-out is worth the private embarrassment that accompanies that $34 overdraft fee on your statement. Another great example of how social influence (not wanting to be embarrassed) can act to the detriment of our financial health. 

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One of our most popular projects, Overdraft Fee Analysis, has students work in groups (jigsaw works well) to dissect overdraft fee policies for major financial institutions. 

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.